Free-Market Conservatives Should Be Skeptical of the Carrier Deal

December 02, 2016

Donald Trump’s recent announcement that he saved 1,000 jobs for Carrier and prevented their move to Mexico should be treated with some degree of skepticism by conservatives. To be sure, it is certainly a good thing that a thousand Americans will still have a job rather than being forced to face an uncertain job market going into the holidays. Even so, things aren’t always what the seem, and taxpayers deserve to know more about the terms of the deal.

Carrier is receiving $7 million in tax breaks over ten years from the Indiana state government via the Indiana Economic Development Corporation, which does not require legislative approval for its actions. This is textbook crony capitalism, which the Mercatus Center defines as “privileges that governments give to particular businesses and industries.” Such a deal is unfair to other businesses who are not receiving any such subsidies and experiencing the same challenges and difficulties Carrier is.

This alone was likely not enough to keep Carrier in Indiana, as the CEO of Carrier’s parent company, United Technologies, stated that the move to Mexico would have saved the company $65 million a year. More likely, the decision was driven by the fact that United Technologies receives $6.7 billion in federal contracts annually. Such a case could be a signal that Trump intends to reward corporations that do as he likes, while punishing those that do not. This would set a precedent, as Jack Shafer of Politico aptly describes it, of Trump “reimagin[ing] his presidency as economic czarship through whom all major economic decisions must pass.” Such a degree of federal intervention in the economy would only further the extent to which government already picks winners and losers in the marketplace, and harm small businesses and consumers the most.

This being said, there is the potential that market-oriented policy considerations played into Carrier’s decision to keep jobs in Indiana. Trump’s plans to lower the corporate tax rate and reduce the regulatory burden both promise to make the United States a more business-friendly environment. Jobs that are kept in the United States, or brought back to the United States, because of reforms that make the American economy freer and more competitive are something to celebrate. However, conservatives should withhold their praise for the deal until they find out more about its stipulations. After all, government intervention in the economy is very rarely something to commend.